Venture capital (VC) investments in the non-banking finance companies (NBFCs) surged in 2024, marking a notable pivot towards safer, proven business models with clear exit opportunities.
Amid a tepid growth in the overall VC funding, NBFCs raised approximately $1.2 billion across 50 equity rounds, a jump of 70% from $717 million across 64 rounds in 2023, Tracxn data showed.
The broader VC landscape saw only a modest 6% increase in funding during the same period, underlining the outsized growth in NBFC-focused investments.
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“NBFCs operating in niches like education financing, loans against property, and affordable housing have consistently delivered multi-billion-dollar outcomes,” said Arpit Beri, partner, India investments at Jungle Ventures. “Unlike some sectors, this isn’t a winner-takes-all market – several players can flourish in each niche,” he added.
Jungle Ventures backs Infinity Fincorp, a Mumbai-based NBFC providing property-backed loans to MSMEs.
The fintech space, encompassing digital lenders and payment companies, has faced headwinds in recent years. Regulatory scrutiny by the Reserve Bank of India (RBI) on unsecured lending, coupled with thin margins in payments due to low merchant discount rates (MDR), has cooled investor enthusiasm. Monetisation options for these platforms often rely on lending or wealth management, segments already dominated by established players.
“Fintech investments have tempered due to the RBI’s stance on unsecured lending and concerns over steep interest rates charged by some platforms,” said Mitesh Shah, co-founder of Inflection Point Ventures (IPV). IPV recently invested in LoanKuber, an NBFC specialising in mortgage loans for MSMEs, which raised $3.5 million in 2024.
Shah noted that digital lenders face higher capital costs and ongoing regulatory uncertainty compared to traditional NBFCs, making the latter a more attractive bet for VCs.
NBFCs such as Vastu Housing Finance, Mintifi, and Finova Capital led the charge in 2024, each securing over $100 million in equity funding. Other notable deals included Vivifi India Finance, Vridhi Finserve Home Finance, and Sarvagram, which focuses on rural lending.
Unlike digital platforms, NBFCs often enjoy smoother access to capital from non-VC investors, thanks to their structured and regulated nature, which offers clear pathways to profitability and exit opportunities.
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